I really recommend listening to this Youtube with Richard Murphy, Emeritus Professor of Accounting Practice and John Christensen, co-founder of the Tax Justice Network.
The subject was the idea of homo economicus – the supposed rational economic actor at the heart of mainstream economics – and its critics.
John traces the origins of the concept back to the late nineteenth century, when economics shifted from being a branch of moral philosophy into the mathematically-driven neoclassical framework most of us were taught at university.
One of the key figures was Francis Ysidro Edgeworth, a mathematician and economist at Oxford. Edgeworth drew on Jeremy Bentham’s utilitarian philosophy – the idea that human beings are rational calculators of pleasure and pain – Edgeworth sought to create a perfectly tidy model of human behaviour. We were, he argued, calculating machines engaged in constant cost-benefit analysis, each of us pursuing our own utility.
Modern models of the economy, like – the DSGE models used by the Bank of England and the UK Office for Budget Responsibility – still rest on the fiction of a single rational agent – or homo economicus – who knows everything and always restores balance.
And these models continue to shape policy. They produce neat forecasts that always return to equilibrium, because the assumptions guarantee that outcome. They are sadly blind to the lived reality of power, inequality, exploitation and environmental breakdown.
Investors in peace, one of my projects, something else. We don’t see homo economicus, we see homo pax. Our true nature is peace and as long as we don’t realise and get to enjoy and appreciate that, we will continue to be homo errorum leading to homo insatisfactus (man of error, unsatisfied man).
This is where Investing in peace and political economy overlap: as long as economics and business continue to model their art on misguided views of what it is to be human, they will continue to guide policy in the wrong direction.
If you are working with economic policy we urge you to look closer at yourself: what is it you really want, what is driving you? Can it be that is something you share with the rest of the people on the planet?
Stephen Hinton Consulting 